Posts Tagged ‘natural gas demand’

DEP ordered partial shutdown of 2 drilling sites for not having permits.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

HARRISBURG – Reacting to regulation violations and some activities by companies exploring for natural gas in the Marcellus Shale, state environmental regulators on Friday held an unprecedented summit with gas drillers to define expectations for water and land protection.

The meeting came about a week after regulators took steps to rein in the burgeoning exploration industry and its increasing demand for water. The Susquehanna River Basin Commission warned drillers they needed water-withdrawal permits, and the state Department of Environmental Protection ordered the partial shutdown of two drilling sites for not having such permits.

Citing Pennsylvania’s coal and oil past and current commitment to renewable energies, DEP Secretary Kathleen McGinty assured the state “likes energy” and is “not allergic” to the effort required to extract it, but cautioned that her department will expend as much energy to protect the environment and natural resources.

“This is not about sending a signal that we don’t want to be a partner,” she said. “It’s just about some good rules for the road.”

Experts have known about the Marcellus Shale layer, which runs from upstate New York into Virginia and touches northern Luzerne County, for decades. They believe it contains enough recoverable gas to supply America’s natural gas demand for two years. However, technology has only recently advanced enough to tap the shale, which lies as much as 8,000 feet below the surface.

J. Scott Roberts, DEP deputy secretary in the Office of Mineral Resources Management, announced additions to the agency’s usual drilling permit specifically for Marcellus Shale that include detailed estimates of water use.

Paul Swartz, the river basin commission’s executive director, said companies need to make timely applications and factor the permitting process into their drilling timelines. Two permits were approved at the commission’s meeting on Thursday, he said, but another 84 – about a year’s worth of work – still await approval. Though there is a water-use threshold for requiring a permit, he said any work in the Marcellus would exceed that threshold and require a permit.

Exploration in the Marcellus is unlike gas exploration elsewhere in the state because deposits are vastly deeper, mostly unproven and necessary infrastructure, such as pipelines and water-treatment facilities, does not exist.

As energy prices continue to rise, drilling in the deep shale has become more enticing. DEP issued a record number of permits in 2004, 2005 and 2006. The rise leveled off in 2007 with 7,241 permits. So far in 2008, 2,510 have been issued.

Copyright: Times Leader

Expert says leases signed for $18,000 per acre in productive areas of Texas.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

TUNKHANNOCK – Around January, Cal Otten’s parents signed a lease at $125 per acre to allow natural-gas exploration on their Forkston Township property in Wyoming County. Had they waited until now, they probably could have received $2,500 per acre.

That’s what Otten was offered a week ago.

“I thought $125 was a lot, actually, at the time,” said Otten, who owns 140 acres near his parents’ property.

Do a little math and you’ll see Otten’s parents made about $34,375 on their 275 acres. Not a bad haul for anyone, much less a couple in their golden years.

Cal Otten is holding out, even though he stood to gain $350,000. He wants a higher stake in the royalties if gas is ever extracted from his land, which means, yes, companies are giving away money on the speculation that they might find gas.

But that speculation is grounded in science, testing and history. Experts believe the thick Marcellus Shale that stretches deep underground from Kentucky to New York, including parts of Luzerne County, has the potential to produce as much natural gas as similar shale deposits in northern Texas.

Kenneth L. Balliet, a forestry and business management educator with the Penn State Cooperative Extension, recently took a trip to Fort Worth to see the economic impacts of those deposits. He said leases are being signed for $18,000 per acre in areas where production has proven strong.

Though there are only about 20 wells in Pennsylvania so far, Balliet expects local production to eventually rival Texas’ Barnett Shale. He said a gas company confided it plans to spend $1 billion this year in leasing agreements in Pennsylvania.

The Marcellus deposit is probably about four times as big as the Texas shale, he said, and a Penn State geologist has estimated that if just a tenth of the gas is recovered, it could fulfill America’s natural gas demand for two years.

“We’re talking lots of changes going on in the communities in terms of jobs: welders, pipe fitters, mechanics, construction,” he said.

Rod McGuirk, a Franklin Township landowner, believes the rush hasn’t yet hit Luzerne County, but it’s coming.

“A lot’s going to happen in the next few months if this keeps going as it’s going. We’re just in the forefront of this,” he said.

He received an offer of $300 per acre on his 56 acres about eight months ago, but hasn’t received another one since. He’s used that time to attend information meetings around Towanda so that he’s savvier when the offers start increasing rapidly.

“We’re where they were eight or nine months ago,” he said. “We want to do this on our terms. We don’t want an environmental disaster in 10 years.”

He’s waiting for a certain offer on his land, but wants to cash in before companies start drilling too much.

“It’s a double-edged sword,” he said. “All they have to do is drill three dry wells, and you don’t get squat.”

Matthew Golden, a West Pittston lawyer who’s offered to negotiate for some Franklin Township landowners, said the trick is straddling the line between getting top dollar and retaining enough rights to protect the land.

“That’s the $10,000 question: When’s the right time to sign and at what price? There are more variables than just the price,” he said, such as lease length, royalties, retaining the right to approve where wells go and securing separate payments for pipeline rights of way.

He suggested landowners have a lawyer look over proposed contracts.

“The standard company lease without any changes to it is bad. It gives away basically all the rights. They can pretty much put a well wherever they want. They’re limited to the barebones the state will allow, which is a lot. Pennsylvania is a pretty pro-drilling state,” he said.

But if sited correctly, Balliet said, wells can be environmentally benign.

“It just takes a little bit of planning,” he said. “Does that mean nothing can happen? No, that’s not true. It can and sometimes it does.”

He recommended landowners get their groundwater tested for oil and gas contaminants now to create a benchmark. Then, they have “something to stand on” if there is a problem, he said.

In the end, landowners must choose a number to accept and make peace with the decision.

“You have to do it with the knowledge that three months from now, the price could be 10 percent of what it is now or 1,000 percent of what it is now,” Golden said.

Rory Sweeney, a Times Leader staff writer, may be reached at 970-7418.

Copyright: Times Leader